Indian rupee battles oil, hedging drag; RBI shield, weak dollar cushion fall
- The Indian rupee is expected to open in the 95.74-95.78 range, per traders, having settled at 95.7050 to the dollar on Thursday
MUMBAI: The Indian rupee is expected to come under pressure on Friday, dragged by rising crude oil prices and persistent dollar demand from importers looking to hedge their foreign currency exposure.
However, traders anticipate that the Reserve Bank of India’s ongoing intervention, a daily feature in recent sessions, and a broadly weaker dollar will cushion the local currency and limit losses.
The Indian rupee is expected to open in the 95.74-95.78 range, per traders, having settled at 95.7050 to the dollar on Thursday.
The currency has traded in a narrow 30-paisa range so far this week, repeating last week’s pattern.
On a daily basis, the rupee has come under pressure from oil and importer hedging, with declines then stalling on RBI intervention.
The dollar’s weakness from the US Treasury taking steps to support long-maturity bonds has worked in the RBI’s favour in supporting the rupee.
Based on what has happened in recent days, “it would be reasonable” to assume that RBI will again intervene and the rupee will be in narrow range with risks on the downside, a currency trader at a bank said.
Thanks to RBI anchoring the currency, intraday volatility will be limited and speculative flows will be absent, he added.
Dollar struggles
The dollar remained under pressure on Friday and was on track for a weekly loss, with markets largely seeing the US Treasury’s bond buyback move a short-lived fix.
The selloff in longer-dated US Treasuries resumed on Thursday, cutting short the relief rally sparked by the Treasury Department’s decision to double buybacks of longer-maturity securities next quarter.
This came despite US Treasury Secretary Scott Bessent saying the U.S may repurchase more Treasuries.
Oil pain
Brent crude was hovering just below $94 a barrel on Friday, after rising more than 2% in the previous session. It has climbed nearly 12% over the past two weeks with uncertainty over the outcome of the U.S.-Israeli war with Iran keeping supply concerns high.
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